Defence treaty under attack

Austal
chief executive Andrew ­Bellamy has criticised a planned treaty designed to boost military exports to the United States, warning that it will only add to the cost and ­complexity of doing business for ­Australian companies.

His concerns have been echoed by a former Australian defence acquisition attaché to Washington and US export control director with the Defence Materiel Organisation, Steve Hyland. He has warned that the benefits of the treaty are “overstated" and weighted heavily in favour of US exporters.

The Australia-US Defence Co­operation Treaty has been passed by the US Congress, but the Australian Parliament is yet to approve it. The treaty has been touted as offering Australian exporters easier entree to a $US300 billion-a-year defence market.

It is aimed at making it simpler for Australian and US defence businesses to deal with each other, overcoming the complex US export control system, which can involve costly licensing fees and export approval delays of up to 12 months.

“The defence trade treaty is going to mean defence companies having an extra layer of bureaucracy to manage,’’ Mr Bellamy told The Australian Financial Review.

“I don’t believe the treaty will meet its intent of making trade . . . flow more easily between the two countries,’’ he added.

Mr Bellamy said a factor in Austal basing its operations to build Littoral Combat Ships for the US Navy in ­Alabama was to avoid the complexity of the existing US arms export ­regulations.

“Our US business is so vital to the company that we are very cautious about our approach to [export control] compliance,’’ Mr Bellamy said.

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His comments come despite the ­Gillard government launching extensive consultations with defence companies around the country over the past 12 months to soothe concerns over compliance costs.

Under the terms of the treaty, higher physical security levels for premises, clearances, staff training and upgrading of computer systems would be required.

Mr Hyland, who is now the principal of consultancy US Trade and Export Control Services, says in an article prepared for Australian Defence Magazine that controls over US defence articles in Australia will be far more stringent than those applying to Australian defence articles in the US.

He insists the Gillard government also failed to carry out a regulatory impact statement on the treaty, which meant claims that it would reduce export delays and cut project delivery times had not been scrutinised.

The treaty would also not apply to sensitive US technologies involving third countries, affecting projects like the air warfare destroyers, which involved Spanish contractor Navantia.

“Very few Australian companies have critically reviewed the planned changed arrangements, assuming any change is positive . . . and SMEs particularly will pay a high price,’’ Mr Hyland told the Financial Review ­yesterday.

But the Gillard government announced in November that it would waive membership fees for SMEs ­joining a treaty trading community.

The government has also promised to waive fees for processing SME staff security clearances.